SNP Holds to Old Pro-EU Expertise Even As Experts Themselves Back Off

It is no secret that the Scottish National Party – which governs Scotland – is seizing upon Brexit as an excuse to re-run the independence referendum of 2014. Sure, 55% of Scots chose to stay in the United Kingdom, but – the Nats insist – that was before England pulled everyone out of the EU.

Of course, this sort of argument ignores the more than one million Scots (38%) who also voted Leave – and of course, nothing can be said about Wales actually agreeing with England on the issue. The Scots have been aggrieved, they insist.

As part of Operation Nurse the Great Grievance, the Scottish Government has released its “own” report on the economic effects of leaving the EU. I put “own” in quotes because it’s mostly a rehash of various other economic reports, centered largely on the original UK Treasury report that effectively launched Project Fear.

Of course, the Nats threw in their own language in an attempt to justify their anguish. I found this line particularly interesting:

For example, the Fraser of Allander Institute, an economic research body based at Strathclyde University, have revised down their forecasts of Scottish GDP growth in 2017 from 1.9% to 0.5% in light of the referendum result. A number of organisations have made similar downward revisions to their UK forecasts.

Said “similar downward revisions” have, in point of fact, been revisions upward from previous assertions that a Leave vote would trigger a recession. Indeed, even the Nats had to admit in the above quote that Strathclyde now says Scotland will avoid recession next year despite the Leave vote.

More importantly, however, it provides an opportunity for the Treasury report to be re-examined, at which point it is hardly the definitive analysis claimed by David Cameron then and Nicola Sturgeon now.

There are, in fact, three key problems with the Treasury report:

First, it dismisses any possible gains from a reduction in EU regulations. Now, one can argue that the cost of regulation is less than the gains of trade from EU membership (how successful the argument will be is another issue). However, one cannot simply dismiss the cost away.

Second, it uses a Canada-EU trade deal as a model without accounting for Canada’s deeply protective “supply management” in agriculture. When it comes to an analogy for a UK free-trade deal with EU, the Canada deal is quite sensible. However, Canada’s “supply management” system of agricultural protection is overly expensive and complex even by EU standards. It was so bad it nearly got Canada kicked out of the Trans-Pacific Partnership. The idea that the UK and the EU would construct something similar in a mutual trade deal is hard to fathom.

Finally, there was no attempt to examine the potential effects of a reduction in taxes that could result from leaving the EU (and EU mandates for certain value-added taxes). Now, one must be fair to the Treasury in that the Leave campaign didn’t suggest a tax cut, but that doesn’t make it impossible. The current Prime Minister, Theresa May, is apparently considering reducing corporate taxes as well – to the EU’s chagrin (Telegraph, UK).

These were, of course, problems with the report before the vote was held. In the times since, several nations have made overtures about trade deals with the UK – before Cameron was even out the door as PM (Daily Mail, UK). It was a reaction fast enough to surprise a firm euroskeptic such as yours truly, let alone the change-averse civil service.

In summary, the economic argument for the EU had its weaknesses from the beginning, weaknesses which have only grown more obvious since 23 June. The Scottish government’s first attempt at independence sank on economic arguments. Ironically, its second attempt may suffer the same fate.

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